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                                                                   EXHIBIT 10.3
                              EMPLOYMENT AGREEMENT

         This EMPLOYMENT AGREEMENT ("Agreement"), dated ________________, 2004,
between CASCADE BANK ("Cascade") and ROBERT M. ITTES ("Ittes") takes effect on
the effective date of the merger of Issaquah Bank ("Issaquah") and Cascade.

                                    RECITALS

         A. Cascade and Issaquah have entered into an Agreement and Plan of
Merger (the "Plan") pursuant to which Issaquah will be merged into Cascade (the
"Merger").

         B. Cascade wishes to retain the services of Ittes following the Merger
in the capacity set forth herein, and Ittes wishes to accept employment with
Cascade in such capacity following the Merger.

                                   AGREEMENT

         The parties agree as follows.

         1.     Employment. Cascade agrees to employ Ittes, and Ittes agrees to
accept employment by Cascade, on the terms and conditions set forth in this
Agreement. During the term of his employment under this Agreement, Ittes will
have the title "President, Issaquah Bank Division of Cascade Bank" and will
serve as a member of the Executive Management Committee of Cascade.

         2.     Effective Date and Term.

                (a) Effective Date. This Agreement is effective on the
         effective date of the Merger ("Effective Date").

                (b) Term. The term of this Agreement is two (2) years ("Term"),
         beginning on the Effective Date.

                (c) Abandonment of the Merger. If the Merger is abandoned or
         terminated before the Effective Date, this Agreement will not become
         effective and will be void.

         3.     Duties. Ittes will faithfully and diligently perform the duties
assigned to him from time to time by Cascade's board of directors, or by the
President or Chief Executive Officer of Cascade. Ittes will use his best
efforts to perform his duties and will devote full time and attention to these
duties during working hours. These duties will include, without limitation, the
following:

                (a) Issaquah Performance. Ittes will be responsible for the
         performance of Issaquah Bank Division of Cascade, including, without
         limitation, directing that daily operational and managerial matters
         are performed in a manner consistent with Cascade's policies.



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                (b) Development and Preservation of Business. Ittes will be
         responsible for the development and preservation of banking
         relationships and other business development efforts (including
         appropriate civic and community activities) in the Issaquah market
         area.

                (c) Report to Chief Executive Officer. Ittes will report
         directly to the Chief Executive Officer of Cascade. Cascade's board of
         directors may, from time to time, add to, delete from, or modify
         Ittes's performance responsibilities to accommodate objectives of
         Cascade. Ittes will assume any additional positions, duties, and
         responsibilities as may reasonably be requested of him with or without
         additional compensation, as appropriate and consistent with Sections
         3(a) and 3(b) of this Agreement.

         4.     Salary. Initially, Ittes will receive a salary of $155,064 per
year, to be paid in accordance with Cascade's regular payroll schedule.

         5.     Incentive Compensation. Cascade's board of directors, or a
committee thereof, will determine the amount of bonus, if any, to be paid to
Ittes at the end of each calendar year of the Term. The method used to
determine the amount of bonus, if any, will be the same as that used with other
members of Cascade's Executive Management Committee and will weigh factors that
include the Issaquah Bank Division profitability, loan and deposit growth,
credit quality, quality of customer service, leadership and other specifically
negotiated goals.

         6.     Income Deferral and Benefits. Subject to eligibility
requirements, and in accordance with and subject to any policies adopted by
Cascade's board of directors or a committee thereof with respect to any benefit
plans or programs, Ittes will be entitled to receive benefits comparable to
those offered to other officers of Cascade with position and duties comparable
to those of Ittes. The foregoing notwithstanding, it is the specific and agreed
intent that the total compensation of Ittes shall be, in the aggregate,
comparable to the total compensation Ittes is presently receiving at Issaquah.

         7.     Stock Options. At the commencement of the Term, Ittes shall
receive stock options to purchase 25,000 shares of Cascade Financial
Corporation common stock. Five thousand of such options shall vest on the first
anniversary of the Effective Date, and 5,000 of such options shall vest on each
anniversary thereafter until all 25,000 shares have vested, contingent upon
continued employment on such dates. Such options will expire ten (10) years
from the date of grant, or sooner in the event of termination of Ittes's
employment. The options granted shall be incentive stock options; provided,
however, to the extent the aggregate fair market value of stock with respect to
which the incentive stock options are exercisable for the first time during any
calendar year exceeds $100,000, such options shall be treated as non-qualified
options. If Ittes's employment is terminated by Cascade without Cause or by
Ittes with Good Reason (as those terms as defined below), prior to all of the
options having vested, the vesting schedule for all unvested options shall be
accelerated so that Ittes will be able to exercise all such options.

         8.     Deferred Compensation Plan. During the Term, and for the three
(3) years after expiration of the Term, if Ittes continues his employment with
Cascade, Cascade will contribute a minimum of $15,000 annually to a Deferred
Compensation Plan for Ittes's benefit. If the




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amount contributed annually to such plan for executives in comparable positions
exceeds $15,000 in any such year, Ittes shall receive a contribution equal to
the higher amount.

         9.     Business Expenses. Cascade will reimburse Ittes for ordinary and
necessary expenses (including, without limitation, business travel,
entertainment and similar expenses) incurred in performing and promoting
Cascade's business. Ittes will present from time to time itemized accounts of
these expenses, subject to any limits of Cascade policy or the rules and
regulations of the Internal Revenue Service.

         10.    Change of Control. On the Effective Date, Cascade will enter
into a Change of Control Agreement/Severance Agreement with Ittes in the form
attached hereto.

         11.     Termination.

                (a) Termination By Cascade For Cause. If, before the end of the
         Term, Cascade terminates Ittes's employment for Cause (defined below)
         or Ittes terminates his employment without Good Reason (defined
         below), Cascade will pay Ittes the salary earned and expenses
         reimbursable under this Agreement through the date of Ittes's
         termination. Ittes shall have no right to receive compensation or
         other benefits after termination under this Section 11(a).

                (b) Other Termination By Cascade. If, before the end of the
         Term, Cascade terminates Ittes's employment without Cause or Ittes
         terminates his employment for Good Reason, Cascade will pay Ittes a
         lump sum payment in an amount equal to the Compensation he would have
         received for the balance of the Term if his employment had not
         terminated, and Cascade will continue Ittes's coverage under all
         employee welfare and health benefit plans as in effect on the
         termination date (or provide Ittes with equivalent benefits) through
         the expiration of the Term.

                (c) Death or Disability. This Agreement terminates: (1) if
         Ittes dies, or (2) if Ittes is unable to perform his duties and
         obligations under this Agreement for a period of ninety (90) days as a
         result of a physical or mental disability arising at any time during
         the Term, unless with reasonable accommodation Ittes could continue to
         perform his duties under this Agreement and making these
         accommodations would not pose undue hardship to Cascade. If
         termination occurs under this Section 11(c), Ittes or his estate will
         be entitled to receive only the compensation and benefits earned and
         expenses reimbursable through the date this Agreement terminated.

                (d) Termination by Ittes. If Ittes voluntarily terminates his
         employment with Cascade, without Good Reason prior to expiration of
         the Term to accept other employment, Ittes agrees to pay Cascade
         $100,000 on the date of his termination, and Cascade shall have the
         right to offset such amount against any amount then owing by Ittes to
         Cascade.

         12.    Definition of "Cause". "Cause" means any one or more of the
following, as reasonably determined by Cascade:




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                (a) Willful misfeasance or gross negligence in the performance
         of Ittes's duties for Cascade that continues for more than ten (10)
         days after written notice to Ittes specifying conduct or omission that
         constitutes the misfeasance or gross negligence.

                (b) Conviction of a crime in connection with his duties for
         Cascade.

                (c) Conduct demonstrably and significantly harmful to Cascade,
         as reasonably determined by Cascade's Compensation and Personnel
         Committee on the advice of legal counsel that continues for more than
         ten (10) days after written notice to Ittes specifying the harmful
         conduct.

                (d) Conviction of a felony.

                (e) Violation of Cascade's anti-discrimination and harassment
         policies.

                (f) Breach of the covenants set forth in Sections 15 and 16
         of this Agreement.

         13. Definition of "Good Reason". "Good Reason" means any one or more
of the following:

                (a) A reduction in Ittes' salary or a material adverse change
         in his perquisites, benefits or vacation, other than as part of an
         overall program applied uniformly and with equitable effect to all
         members of the senior management of Cascade.

                (b) The assignment to Ittes, without his consent, of any
         duties materially inconsistent with those set forth in this Agreement.

                (c) A requirement that Ittes be based at any location not
         within forty (40) miles of his business office on the date of this
         Agreement.

         14. Return of Bank Property. If and when Ittes ceases, for any reason,
to be employed by Cascade, Ittes must return to Cascade all keys, pass cards,
identification cards and any other property of Cascade. At the same time, Ittes
also must return to Cascade all originals and copies (whether in hard copy,
electronic or other form) of any documents, drawings, notes, memoranda,
designs, devices, diskettes, tapes, manuals and specifications which constitute
proprietary information or material of Cascade. The obligations in this
paragraph include the return of documents and other materials which may be in
Ittes's desk at work, in Ittes's car or place of residence, or in any other
location under Ittes's control.

         15. Confidentiality. Ittes will not, during and following expiration
of the Term, use for his own purposes or disclose to any other person or entity
any confidential information concerning Cascade or their business operations or
customers, unless: (1) Cascade consents to the use or disclosure of their
respective confidential information, (2) the use or disclosure is consistent
with Ittes's duties under this Agreement, or (3) disclosure is required by law
or court order.




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         16. Noncompetition.


                (a) Participation in a Competing Business. During the period
         Ittes is employed by Cascade and for sixteen (16) months after Ittes's
         employment with Cascade terminates, Ittes will not become involved
         with a Competing Business (defined below) or serve, directly or
         indirectly, a Competing Business in any manner, including, without
         limitation, as a shareholder, member, partner, director, officer,
         manager, investor, organizer, "founder," employee, consultant, or
         agent; provided, however, that Ittes may acquire and passively own an
         interest not exceeding 2% of the total equity interest in any
         Competing Business.

                (b) No Solicitation. During the period Ittes is employed with
         Cascade and for sixteen (16) months after Ittes's employment with
         Cascade terminates, Ittes will not, directly or indirectly, solicit or
         attempt to solicit: (1) any employees of Cascade, or any of Cascade's
         subsidiaries, to leave their employment, or (2) any customers of
         Cascade, or any of Cascade's subsidiaries, to remove their business
         from Cascade or to participate in any manner in a Competing Business.
         Solicitation prohibited under this section includes solicitation by
         any means, including, without limitation, meetings, letters or other
         mailings, electronic communications of any kind, and internet
         communications.

                (c) Employment Outside the Restricted Area. Nothing in this
         Agreement prevents Ittes, after his employment by Cascade is
         terminated, from accepting employment outside the Restricted Area
         (defined below) with a Competing Business, as long as Ittes will not:
         (1) act as an employee or other representative or agent of the
         Competing Business within the Restricted Area, or (2) have any
         responsibilities for the Competing Business' operations within the
         Restricted Area.

                (d) Competing Business. "Competing Business" means any office
         of a financial institution ("financial institution" means a state or
         national bank, a state or federal savings and loan association, a
         mutual savings bank, or a state or federal credit union), trust
         company or mortgage company (including without limitation, any
         start-up or other financial institution, trust company or mortgage
         company) located in King or Snohomish County, Washington (the
         "Restricted Area").

                (e) Change of Control of Cascade. In the event of a change of
         control of Cascade, as that term is defined in the Change of
         Control/Severance Agreement referred to in paragraph 10 hereof, this
         paragraph 16 (Noncompetition) shall be null and void and of no further
         force and effect.

         17. Enforcement.

                (a) Cascade and Ittes stipulate that, in light of all of the
         facts and circumstances of the relationship between Ittes and Cascade,
         the agreements referred to in Sections 11(d), 15 and 16 (including
         without limitation their scope, duration and geographic extent) are
         fair and reasonably necessary for the protection of Cascade's
         confidential information, goodwill and other protectable interests. If
         a court of competent jurisdiction should decline to enforce any of
         those covenants and agreements, Ittes and





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         Cascade request the court to reform these provisions to restrict
         Ittes's use of confidential information and Ittes's ability to compete
         with Cascade to the maximum extent, in time, scope of activities and
         geography, the court finds enforceable.

                (b) Ittes acknowledges that Cascade will suffer immediate and
         irreparable harm that will not be compensable by damages alone, if
         Ittes repudiates or breaches any of the provisions of Sections 15 and
         16 or threatens or attempts to do so. For this reason, under these
         circumstances, Cascade, in addition to and without limitation of any
         other rights, remedies or damages available to it at law or in equity,
         will be entitled to obtain temporary, preliminary and permanent
         injunctions in order to prevent or restrain the breach, and Cascade
         will not be required to post a bond as a condition for the granting of
         this relief.

         18. Adequate Consideration. Ittes specifically acknowledges the
receipt of adequate consideration for the covenants and agreements contained in
Sections 11(d), 15 and 16 and that Cascade is entitled to require him to comply
with these sections. These sections will survive termination of this Agreement.
Ittes represents that if his employment is terminated, whether voluntarily or
involuntarily, Ittes has experience and capabilities sufficient to enable Ittes
to obtain employment in areas which do not violate this Agreement and that the
Bank's enforcement of a remedy by way of injunction will not prevent Ittes from
earning a livelihood.

         19. Arbitration.

                (a) Arbitration. At either party's request, the parties must
         submit any dispute, controversy or claim arising out of or in
         connection with, or relating to, this Agreement or any breach or
         alleged breach of this Agreement, to arbitration under the American
         Arbitration Association's rules then in effect (or under any other
         form of arbitration mutually acceptable to the parties). A single
         arbitrator agreed on by the parties will conduct the arbitration. If
         the parties cannot agree on a single arbitrator, each party must
         select one arbitrator and those two arbitrators will select a third
         arbitrator. This third arbitrator will hear the dispute. The
         arbitrator's decision is final (except as otherwise specifically
         provided by law) and binds the parties, and either party may request
         any court having jurisdiction to enter a judgment and to enforce the
         arbitrator's decision. The arbitrator will provide the parties with a
         written decision naming the substantially prevailing party in the
         action. This prevailing party is entitled to reimbursement from the
         other party for its costs and expenses, including reasonable
         attorneys' fees.

                (b) Governing Law. All proceedings will be held at a place
         designated by the arbitrator in King County, Washington. The
         arbitrator, in rendering a decision as to any state law claims, will
         apply Washington law.

                (c) Exception to Arbitration. Notwithstanding the above, if
         Ittes violates Section 15 or 16, Cascade will have the right to
         initiate the court proceedings described in Section 17(b), in lieu of
         an arbitration proceeding under this Section 19 Cascade may initiate
         these proceedings wherever appropriate within Washington state; but
         Ittes will consent to venue and jurisdiction in King County,
         Washington.



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         20. Miscellaneous Provisions.

                (a) Defined Terms. Capitalized terms used as defined terms,
         but not defined in this Agreement, will have the meanings assigned to
         those terms in the Plan.

                (b) Regulation O. Ittes will be an "executive officer" for
         purposes of Federal Reserve Board Regulation O.

                (c) Entire Agreement. This Agreement constitutes the entire
         understanding between the parties concerning its subject matter and
         supersedes all prior agreements

                (d) Reviewed with Independent Counsel/Construction of
         Agreement. Each party had the opportunity to review this Agreement
         with legal counsel of their choosing, and this Agreement is the
         outcome of that review process. This Agreement has been entered into
         after negotiation and review of its terms and conditions by parties
         under no compulsion to execute and deliver a disadvantageous
         agreement. This Agreement incorporates provisions, comments and
         suggestions proposed by both parties. No ambiguity or omission in this
         Agreement shall be construed or resolved against any party on the
         ground that this Agreement or any of its provisions was drafted or
         proposed by that party.

                (e) Binding Effect. This Agreement will bind and inure to the
         benefit of Cascade's and Ittes's heirs, legal representatives,
         successors and assigns.

                (f) Litigation Expenses. If either party successfully seeks
         to enforce any provision of this Agreement or to collect any amount
         claimed to be due under it, this party will be entitled to
         reimbursement from the other party for any and all of its
         out-of-pocket expenses and costs including, without limitation,
         reasonable attorneys' fees and costs incurred in connection with the
         enforcement or collection.

                (g) Waiver. Any waiver by a party of its rights under this
         Agreement must be written and signed by the party waiving its rights.
         A party's waiver of the other party's breach of any provision of this
         Agreement will not operate as a waiver of any other breach by the
         breaching party.

                (h) Assignment. The services to be rendered by Ittes under
         this Agreement are unique and personal. Accordingly, Ittes may not
         assign any of his rights or duties under this Agreement.

                (i) Amendment. This Agreement may be modified only through a
         written instrument signed by all parties.

                (j) Severability. The provisions of this Agreement are
         severable. The invalidity of any provision will not affect the
         validity of other provisions of this Agreement.



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                (k) Governing Law. This Agreement will be governed by and
         construed in accordance with Washington law, except to the extent that
         certain matters may be governed by federal law.

CASCADE BANK

By:
    -------------------------------------    -----------------------------------
     Carol K. Nelson, President/CEO          ROBERT M. ITTES




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